Delta, WestJet withdraw plans for U.S.-Canada joint venture

Delta Air Lines and Canadian carrier WestJet have withdrawn their application for antitrust immunity for a joint venture between the two carriers on flights between the U.S. and Canada.

They made the decision in response to a U.S. Department of Transportation order proposing the airlines would have to give up flying rights at New York’s LaGuardia Airport and make other concessions in order to gain approval.

Atlanta-based Delta and Calgary-based WestJet announced plans for a joint venture nearly three years ago and submitted their application for the joint venture in 2018. The DOT last month granted tentative approval subject to remedies to address competitive concerns.

Delta and WestJet called the proposed conditions for antitrust immunity “arbitrary and capricious.”

The flying rights, or “slots,” at LaGuardia Airport are considerably valuable for an airline like Delta, which has in recent years established a hub at LaGuardia.

Delta obtained slots for the LaGuardia hub through a swap with US Airways nearly a decade ago in which Delta exchanged some of its slots at Washington’s Reagan National Airport for the slots at LaGuardia. US Airways later merged with American Airlines.

The Friday filing by Delta and WestJet called the requirement that they divest slots at LaGuardia the “most onerous” of the conditions, which they said are “unreasonable and unacceptable.”

They said divesting the slots would not address any reduction of competition resulting from the joint venture, which would have allowed them to coordinate on schedules and pricing on flights between the U.S. and Canada, and that the Canadian Competition Bureau reviewed the deal without imposing such conditions.

The DOT raised concerns about a potential reduction in competition on New York-Toronto flights, which is the largest U.S.-Canada trans-border market and the second-largest international air travel market from the U.S.

While airlines’ flight schedules have been cut this year due to the effects of the COVID-19 pandemic, over the long term the slot system limits the ability of airlines to expand at LaGuardia.

Delta controls 45% of the market at LaGuardia, which it said is less than the share dominant hub carriers have at other hub airports.

According to the filing by Delta and WestJet, divesting the slots at LaGuardia would force the carriers “to sell these strategic corporate assets during a global pandemic that has inflicted an unprecedented crisis on this industry, virtually ensuring that they would be sold at a fire sale price far below their long-term economic value.”

The DOT also proposed that WestJet’s ultra low-cost subsidiary Swoop and its parent company be carved out of the deal, and that WestJet grant interline partnerships with other U.S. airlines on request. WestJet and Delta said such remedies were not imposed on a joint venture between United Airlines and Air Canada.

Delta and WestJet said they “are unwilling to accept these conditions” and therefore withdrew their application and asked the DOT to close the docket.

Delta issued a statement saying it will not implement the joint venture with WestJet, but that the two carriers “remain committed to their partnership and will explore alternative options to deepen their alliance cooperation.”